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USE: Promising market for long term investors

Analysts predict a rebound in the market activities this year and so is the surge in prices

Trading activities on the Uganda Securities Exchange showed a high decrease in market turnover on Jan.06, registering a 97.2% decline to Shs51million compared with the previous day.

The All Share Index modestly increased by 0.6% while the local share index decreased by 0.03% closing  at 1,368.2 and 372.2 respectively.

The day’s performance resonated with the previous recordings over the past years, with the shareholder wealth at the bourse falling for the third year in a row as counters register price drops.

But market analysts who spoke to The Independent in an interview say it is time for prospective investors to buy shares on the bourse as trading activities are expected to rebound as the economy recovers.

“It is an opportune time for long term investors, that is 3-5 years to buy shares on the stock exchange because at least the banking sector is recovering and so are other sectors,” said George Mulindwa, a portfolio manager at Stanlib, a South African firm that manages assets worth US$ 39.5 billion for over 500 000 retail and institutional clients.

“But, if you are that kind of investor, who wants to make profits in probably two-three months, it may not be an ideal time for you.”

He adds that the continued decline in the prices of shares on the bourse over the past three years is a normal cycle for stock markets throughout the world and that it is bound to get better.

Mulindwa, however, notes that is not a guarantee that prices of shares on the stock market will go up as there are various factors at play including demand and supply, level of government ‘s domestic borrowing, and the general performance of the economy.

Arthur Nsiko, former head of research at the African Alliance and now Stanbic Bank says the bourse is expected to perform better as compared with last year in terms of market capitalization and general trading activities given that Uganda and other economies in Sub – Saharan Africa are anticipated to post improved growth numbers.

He says Kenya’s economic growth projections from 5.7% in 2016 to 6% this year is likely to boost trading activities on the bourse as the east African nation hosts a substantial amount of companies trading on the USE.

But Robert Baldwin, the Chief Executive Officer of brokerage firm, Crested Capital and a member of USE Board seem to be cautious.

He says the New Year is still fresh and that investors should use this time to meet their brokers for advice on key investment decisions.

“I don’t want to give an answer on whether to buy or sell now,” Baldwin said, adding “We are waiting for companies to release their performance probably by end of first quarter of this year and hopefully investors will respond accordingly.”

He, however, says the Crane-Bank- DFCU deal might boost market activity once details of the transaction and results for 2016 are out.

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